The SFC’s new AML guidelines

On 27 January 2012, Hong Kong’s Securities and Futures Commission (SFC) published consultation conclusions on proposed new guidelines relating to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO). The two sets of guidelines, one for licensed corporations and another for associated entities, were gazetted on the same day.

Comments received by the SFC during the consultation focused mainly on the guidance provided on the customer due diligence requirements of the AMLO. Key issues include:

Persons purporting to act on behalf of a customer: Under the AMLO, financial institutions (FIs) are required to identify all persons purporting to act on behalf of a customer and take reasonable measures to verify their identity. The consultation paper proposed that FIs should identify and take reasonable measures to verify the identity of persons who were authorised to give instructions for the movement of funds or assets belonging to a customer. Many respondents had concerns over the practicality of this requirement. In light of the difficulties raised, the guidelines allow FIs to consider a risk-based approach to compliance.

Company searches: In the consultation paper, the SFC proposed FIs should perform company searches for all non-listed Hong Kong corporate customers and for customers incorporated in a jurisdiction that has a public company registry. Despite objections from most respondents, the SFC has retained the requirement for a company search for Hong Kong incorporated customers. For companies incorporated overseas, the SFC has allowed some options to cater for different company verification services available overseas. The requirement does not apply to customers eligible for simplified customer due diligence under the AMLO such as intermediaries regulated in a jurisdiction which is a member of the inter-governmental Financial Action Task Force.

The SFC requires FIs to implement staff training and to monitor its effectiveness. Training records should be maintained for a minimum of three years.

The guidelines will take effect on 1 April 2012 to coincide with the commencement of the AMLO.